The home-buying process can be overwhelming for the first-time buyer. Steps involved in buying a house, it’s all too easy to make a mistake and end up with an unwise investment
Common mistakes can be avoided by new home buyers.
ALWAYS FIX THE BUDGET, FAILING TO FIX A BUDGET IS RISKY
Not having a distinct home purchase plan in place is the biggest folly of potential homebuyers. The first factor to weigh in on is your financial capacity. If you do not know how much you can afford to spend on a house purchase, you will be in big trouble later, especially if all your earnings go towards your home. It all begins with a budget, which is done after factoring in other major expenses especially if you already have other loans to repay.
LOT OF RESEARCH SHOULD BE DONE, INADEQUATE RESEARCH WILL ENDUP IN GLITCHES.
You stand to lose your money and your house if you do not thoroughly research the developer of the project you choose to buy a home from. There are a multitude of flyby-night builders, who do not have an established track record or credibility and are seeking to make a fast buck from unaware homebuyers. Also remember, your home loan sanction can depend on the reputation of the developer. Look up the RERA (Real Estate Regulatory Authority) website to check if your developer is registered as a bona fide real estate company.
So, in future, if you face any issues on the timely delivery of your home or delay in construction, you can register a complaint on the RERA website.
ALWAYS COMPARE INTEREST RATES AND LOAN BENEFITS, NOT COMPARING HOME LOANS IS LOOSING MONEY.
Without a comparative study of various home loan offerings, you could end up paying a much higher interest rate than what other lending institutions are offering. Remember, there’s a huge pool of lenders who offer a lower interest rate than perhaps the bank that you have an account with. It is prudent, therefore, to do a comparative study of all the banks and non-banking financial institutions (NBFCs) and their home loan offerings to choose the best interest rate, tenure and repayment terms capacity.
CHECKING YOUR LOAN ELIGIBILITY AND PROCEED ACCORDINGLY.
Not checking your credit score periodically, especially when some banks offer this service for free these days, is a big mistake. In fact, it’s a good idea, to opt for a pre-approved loan to ascertain your loan eligibility. This will give you an indication of your financial capacity and help during the house hunt.
NOT ACCOUNTING FOR DOWN PAYMENT
Most home loan borrowers are in the dark about this crucial aspect of the borrowing process. No lender, not even your bank, sanctions a 100 per cent housing loan amount. They usually lend about 85-90 per cent of the cost of the house you intend to buy. Moreover, your loan isn’t sanctioned if you do not pay the 15-10 per cent as down payment which is also a kind of ‘trust deposit’.
OVERCONFIDENCE ABOUT A HOME LOAN SANCTION
The real estate market is tipped in favour of homebuyers and there are lenders aplenty; however, it can be quite upsetting if your home loan application is turned down due to various factors such as weak credit score, existing expenditures, insufficient funds, etc. Many home loan borrowers are often under the impression that a pre-approved loan can help them secure a loan—it does not!
Pre-approved loans are based on some basic calculations; they are not based on a detailed analysis of the borrower’s profile. Hence, it doesn’t mean that your loan is secured. During the loan disbursement process, the lending guidelines might change, and it may affect the borrower’s ability to repay a collateral-backed loan. Also, after the loan is preapproved, if the borrower’s financial position deteriorates, it could affect the loan disbursal.
IGNORANCE ABOUT TAX BENEFITS
It is inexcusable if you are a tax-paying Indian citizen and is unaware of the tax benefits that can be availed on a home loan! There are benefits of tax deductions for interest paid on housing loan, in terms of interest paid towards home loan during pre-construction period, on principal repayment, for stamp duty and registration charges, additional deduction under section 80EE and section 80EEA as well as for joint home loan.
CHOOSING UNAFFORDABLE PROPERTY
We all aspire to live the good life. But is it worth it to try and live the unaffordable life? It can be a huge strain on your resources—especially if you take a bigger loan—to buy an expensive home.